March did not see much change to current freight conditions as shipment numbers and rates continued to bounce along the bottom.
One indicator, published by Cass Information Systems, showed that U.S. freight spending surged 38% in 2021 and rose another 23% in 2022. It then reversed direction, falling by 19% in 2023 — and is expected to fall another 14% in the first half of 2024. Cass knows something about freight spending, since they handle the bill paying and other functions for numerous clients in the U.S.
The March Cass Freight Index for Shipments fell by 0.2% in March from February’s index (2.3% when adjusted for seasonality). At the same time, the Cass Freight Index for Expenditures showed a rise of 0.1% over February but was still down 18.5% from March 2023. The Cass indexes cover multiple modes of transportation including truck, rail, ship, air and pipeline; about 75% of the information is derived from truck shipments.
The March 26 collapse of the Francis Scott Key Bridge in Baltimore won’t figure into total freight statistics in a large way, as container shipping is diverted to other East Coast ports. Much of Baltimore’s shipping, however, is “roll-on/roll-off” operations for vehicles and machinery — and a greater need for flatbed trucks to move these products has resulted in higher spot rates.
While crews work to open freight channels to Baltimore ports, predictions are that the port will be closed to container traffic through at least May. The bridge itself will take years to rebuild. Some container traffic may move to the Norfolk, Virginia, port or possibly the port in Wilmington, Delaware, but other East Coast ports are possible alternatives. Watch for rate increases for container and warehouse pickups.
An FTR Intel release in early April noted that the Institute for Supply Management’s Manufacturing Index posted a positive number for the first time in 17 months. Increased manufacturing bodes well for freight markets as manufacturers look to ship their products. Additionally, the production component of the Index showed strength, as did new orders. Imports factor into the numbers, too, and March imports were strong.
Employment numbers were also strong in March, an indication that employers are increasing staff. That’s another factor that bodes well for trucking.
Motive’s Monthly Economic Report for April began with the news that new carrier registrations surged while revocations slowed, indicating a growth in capacity for trucking. The report claims that gains in retail demand and increased consumer confidence are helping slow the contraction for the trucking industry. Motive has been predicting that the freight market will be “more carrier friendly” by the second half of the year.
The issue here is capacity.
Typically, the number of trucks available for hauling freight grows with the demand. When truckers can make money, more trucks are sold. But the biggest reason for the continued low rates is that there are simply too many trucks. The slowing of the contraction in the trucking industry is good news — but only if the trend doesn’t reverse too quickly to allow rates to rise.
A key factor in the Motive report is the number of trucks visiting warehouses of the Top 50 U.S. retailers, as measured by GPS data. The more truck visits, the more freight is moving. Motive reports that March 2024 visits to those retailers jumped 3.9% from February and 3.9% over March 2023 numbers. Department stores, electronics retailers and clothiers experienced an 18.2% increase in visits from March a year ago. The biggest gain was in home improvement centers, which went up 20.5%. If customers are making home improvements and buying new appliances, the benefit to the trucking industry will be great.
Motive predicts that increased warehouse visits will continue, and that 2024 will end at 25-30% higher than 2023. The company forecasts that spot rates will improve later in the year and increased consumer demand will continue.
This month, the U.S. Energy Information Administration (EIA) released its Short-Term Energy Outlook. The EIA is the statistical and analytical agency within the U.S. Department of Energy. The agency predicts that Brent crude oil prices will increase from last year’s $82 per barrel to $89 this year, primarily due to increased global consumption. Barrel prices are expected to drop by $2 for 2025.
While no one wants to see an increase, the amount predicted signifies stability in the market. If prices for diesel fuel remain relatively stable, trucking businesses can more accurately predict their fuel costs, even if those numbers haven’t returned to the lower levels of years ago.
The EIA is expecting hotter summer temperatures and an increased demand for electricity. That’s bad news for carriers that are investing in electric vehicles, especially in areas where the grid isn’t equipped to handle extra charging stations.
Oil prices are highly susceptible to world events, and tensions in the Middle East can still play a part. Weather events can also impact crude oil prices. While the EIA predicts stability, it’s important to remember that such predictions do not include possible catastrophic events.
Finally, DAT Freight and Analytics reported that spot rates for both dry van and refrigerated are down from the March average, while flatbed rates have climbed a few cents. With summer getting closer, building activity should increase and rates should rise with the increased freight levels.
Analysts are still predicting that 2024 will see the trucking market climb out of the freight recession it has endured for more than a year now — but that climb won’t be a fast one. Still, any relief in rates will certainly be welcome.
Cliff Abbott is an experienced commercial vehicle driver and owner-operator who still holds a CDL in his home state of Alabama. In nearly 40 years in trucking, he’s been an instructor and trainer and has managed safety and recruiting operations for several carriers. Having never lost his love of the road, Cliff has written a book and hundreds of songs and has been writing for The Trucker for more than a decade.
